"The top 10 states in terms of Wall Street fees had lower pension
fund investment performance over the last five fiscal years than
the bottom 10 states,"
wrote Hooke and Walters.

The 10 states paying the highest fees paid an average fee of
0.66% of invested capital over the last 5 years, while the
10 lowest paid 0.26%. During that time, the top fee payers had an
average annualized return of 12.44%, while the lowest fee payers
had a return of 12.70%.

So for 0.4% more in fees, the highest payers got back 0.26% less
per year.

"For the five years ending June 30, 2014, we were unable to
find a positive correlation between high fees and high returns.
In fact, we found a negative correlation," said Hooke and
Walters.

The study followed up on initial research from 2012, but
Hooke and Walters said the findings were the same. "The Maryland
Public Policy Institute updates calculations completed two years
ago for the fiscal year ending June 30, 2012. The conclusions
then are identical to those today—more fees equal lower returns,"
they wrote.

Hooke and Walters found that stock-picking active mangers
are just doing a poor job of handling the state's money.

"Evidence suggests that managers who select publicly-traded
securities (on behalf of clients) cannot beat benchmark indices,"
said Hooke and Walters. "According to the S&P Dow Jones
Indices/SPIVA Scorecard Year-Ended 2014, over the five years
ending December 31, 2014, 84% of domestic equity funds failed to
beat the S&P benchmark. On the fixed income side, 73% of
managed fixed income funds failed to beat related indices."

Additionally, Hooke and Walters also said that some states
may not even know what they are paying in fees.

"Based on our work, we conclude that a number of states are not
reporting fees properly," they wrote. "Misreporting may be a
particular problem with private equity and hedge fund
investments, where managers often deduct fees before sending cash
returns. California’s Public Employees’ Retirement System
admitted as much in June 2015, when it said tracking such fees
was complex."

According to the paper, Missouri's fund pays the highest in
fees, according to the researchers analysis, at 1.70%. Following
in the top 5 are South Carolina (1.56%), New Jersey (0.76%),
Maryland (0.73%), and Oregon (0.68%).